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Free AccessMNI: Japan Nippon Life To Boost Yen Bond Holdings in FY23 2H
--Nippon Life Says To Buy and Sell Foreign Bonds 'Flexibly' As FX, Yields Shift
Japan insurers Nippon Life will boost domestic bonds holdings in the second half of this fiscal year, with purchases to include 30-year JGBs and yen-denominated foreign corporate bonds, the company’s chief fund manager said Wednesday.
Intentions are to maintain the current balance of hedged-foreign bond holdings despite high hedging costs but will invest money in attractive corporate bonds, Akira Tsuzuki, senior general manager of finance and investment planning department, told reporters.
Nippon Life sees the balance of unhedged foreign bonds unchanged or flower over the next 6 months after increasing holdings by JPY540 billion in H1. Tsuzui, however, said that the company will consider changing the allocation of hedged and unhedged securities "flexibly" depending on foreign exchange and interest rates developments.
Tsuzui said that foreign bonds held by the company was hit by the rise in interest rates but the losses were offset by the yen’s recent depreciation.
JGB YIELDS TO RISE
The balance of domestic bond holdings increased by JPY410 billion for the April-September period. Nippon Life expects the 10-year JGB yield to move a range of 0.50% to 1.10% for the October-March period and trade at 0.80% in March.
“Our main scenario is that the BOJ scrap the negative interest rate and the YCC simultaneously in the April-September period after wage hikes are confirmed next year,” Tsuzuki said. He added, however, that the BOJ likely wants to avoid a sharp rise in long-term interest rates and keep the YCC for a while after removing the negative interest rate.
Tsuzui said that the current JGB yields, such as 30-year yield around 1.8%, are attractive levels but the company is restricting its purchases for now as those yields could rise further.
Globally, Nippon Life expects the U.S. 10-year interest rate to move between 3.00% and 5.50% for the second half of this fiscal year, and trade at around 4.00% in March, with the Federal Reserve cutting the federal funds rate in or after the July-September period.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.